Recently, Freightwaves reported on the closure of some luxury brand retailers in China as the country is experiencing the so-called brick-and-mortar retail apocalypse. The same trend China is going through now has seemingly been happening in North America for the past several years. There is even a Wikipedia entry dedicated to it. Bloomberg recently dug into the issue and found that the retail apocalypse may not be as bad as it seems.
Retailers was quick to blame the media for exaggerating the demise of retail by sensationalizing the closure of certain retail chain outlets in news reports. Others just flat out denied it and mentioned how in the first three quarters of 2017 alone, more 3,000 retail chain stores were opened.
Bloomberg then showed a graph based on data gathered by the ICSC Research Team and PNC Real Estate Research. There is some truth to the exaggeration as the graph showed the number of closures is about the same as the number of store openings. However, retailers Bloomberg spoke to acknowledged that some 6,800 outlets are slated to close this year. It serves as a stark contrast to the reported “sky-high consumer confidence” with low unemployment and a booming economy.
Comparisons between consumer confidence and retail bankruptcies was conducted to see what kind of economic growth the country is experiencing. In a graph from the University of Michigan Consumer Sentiment Index, as of October 31, 2017, consumer confidence almost went through the roof with a 100% rating based on survey results. This graph was then compared to the research that Bloomberg conducted to see the disparity between assets and retail bankruptcies declared. The news outlet limited its research, though, to include only companies with assets over $100 million. As of this writing, the companies reported to have filed bankruptcies are Sharper Image Corp., Circuit City Stores Inc., Borders Group Inc., Radioshack Corp., The Sports Authority Inc., Payless Shoesource Inc., and Toys “R” Us Inc.
Amazon and the rest of the online retail community may take the brunt of the blame, but when a brick-and-mortar store is not making money, there are few options. Retailers have been hurt by too much inventory that drags on profit.
In some cases, these large brick-and-mortar stores are being converted into e-commerce fulfillment centers.
The Toys “R” Us bankruptcy caught many by surprise, but for some, it represents “the negative view on [traditional] retail.” One company that is predicted to follow suit is teen-jewelry chain Claire’s Stores Inc. With a reported total borrowings of up to $2 billion about to mature in 2019 and 1,600 stores, the weight of the debt may be too much.
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